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PayPal and other TPSOs Send Unexpected 1099-K Forms to Sellers

March 26, 2018 Uncategorized Comments Off on PayPal and other TPSOs Send Unexpected 1099-K Forms to Sellers

Since 2012, payment settlement entities (PSEs) and third party settlement organizations (TPSOs) such as PayPal, Amazon, and eBay have been required to issue 1099Ks to all owners of accounts that reach the following thresholds:

  • $20,000 USD in gross payment volume from sales of goods or services in a single calendar year
  • 200 payments for goods or services in the same year

However, new for 2017, Massachusetts has now mandated that TPSOs report the gross amount paid in settlement to a payee with a Massachusetts address when the gross amount paid in settlement in a calendar year is $600 or greater (regardless of the number of transactions).

As a result, many MA residents are now receiving these forms that indicate their name, address and the income received each month through PayPal. You should retain these 1099K forms and forward them with your tax documents. A TPSO may not know whether a payment made in settlement is subject to tax, either because it lacks information regarding the Massachusetts tax type applicable to the payee, or because it lacks information as to the nature of the payment.

If you are participating in a for-profit activity these payments should be integrated with your business income reporting (e.g. Schedule C) along with any offsetting expenses. If the payments were for personal belongings or a not-for-profit activity these payments may still be reported on your return to avoid IRS or state agency tax notices. We will review the activity and the reporting and verify how to treat this income.

PayPal may begin requesting you to enter your EIN or social security number in order to properly file these forms. If you find a discrepancy on your 1099K form, PayPal does have a helpful link to help resolve – https://www.paypal.com/us/selfhelp/article/common-us-irs-tax-questions-1099k,-b-notice,-and-fatca-faq3405

Please feel free to contact us with any questions.

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